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Manchin Deal Ties Clean Energy Projects to Oil Drilling

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(Bloomberg) The breakthrough spending deal reached by Senators Joe Manchin and Chuck Schumer would require oil and gas lease sales on federal land, potentially undercutting the package’s focus on climate-friendly clean energy.

In addition to spending some $370 billion to fight climate change, the measures would make new renewable power projects on federal land and water contingent on holding conventional oil and gas auctions.

Under the legislation, the Interior Department would only be able to issue new wind and solar rights over the next decade if it has recently held oil and gas lease sales, according to the 725-page bill released Wednesday. The requirements would constrain the Biden administration’s ability to pare fossil fuel developments on federal land, despite pleas from climate activists to halt oil and gas drilling and rapidly pivot to green energy.

In the short term, the Interior Department would be required to hold previously planned lease sales in the Gulf of Mexico and Alaska’s Cook Inlet. The Interior Department had said in May that it was scrapping all three auctions, citing a “lack of industry interest” for the sale of tracts in Alaska’s Cook Inlet and “conflicting court rulings” for the decision to nix two Gulf auctions.

The measures also would effectively reinstate an auction of Gulf leases that was held in November 2021 but later invalidated by a federal judge after finding that the government didn’t sufficiently examine the climate consequences of the move. Under the legislation, the Interior secretary would be required to accept within 30 days the highest valid bids lodged in that sale, which was set to bring in $191.7 million.

Under the bill, the Interior Department would only be able to issue new onshore wind and solar rights of way on federal land if the agency had held an onshore oil and gas lease sale in the prior four months. For offshore wind, the requirement would be for an auction of offshore oil and gas leases spanning at least 60 million acres in the year beforehand.

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The measures lay out requirements for the timing and scope of those auctions. And it mandates that all acceptable bids must result in the issuance of oil and gas leases. If a sale is sparsely attended or no successful bids are lodged for oil and gas leases, the requirement would be met.

The potential mandates follow criticism from some oil and gas advocates that the Biden administration has moved too slowly in offering federal land and water for new drilling. And they come on the heels of a Biden administration proposal for a five-year oil and gas leasing plan that includes an option for no new offshore sales between 2023 and 2028.

The provisions appear to be a concession to Manchin, a West Virginia Democrat who has complained the Biden administration is “blocking increased energy production at home” while encouraging more oil flows from Venezuela and OPEC producers.

“It appears to offer a serious path forward that lifts offshore energy of all types, to the betterment of our nation,” National Ocean Industries Association President Erik Milito said in a statement. “We applaud Senator Manchin’s leadership on an issue of national — and global — consequence.”

The deal would impose long-sought reforms for the oil and gas industry, with new and higher fees for developments on public land and water. That includes requiring energy companies to pay royalties on all of the oil and gas produced on federal lands, including the methane that is vented, flared or otherwise escapes into the atmosphere.

It remains to be seen whether the underlying legislation, which also includes a slew of new and extended tax credits for clean energy and electric vehicles, will be backed by the full Democratic caucus in the 50-50 Senate. It would also have to pass the House, where progressives sought a much more expansive plan.

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